Microsoft, Foxconn ink patent licensing deal

SAN FRANCISCO—Microsoft Corp. said Tuesday (April 16) it entered into a worldwide patent licensing agreement with Taiwan's Hon Hai Precision Co., the parent company of electronics contract manufacturer Foxconn.

Microsoft (Redmond, Wash.) said the deal provides broad coverage under Microsoft’s patent portfolio for devices running the Android and Chrome OS, including smartphones, tablets and televisions. Microsoft said it would receive unspecified royalties from Hon Hai under the agreement.

Microsoft has been aggressive in threatening legal action against handset OEMs perceived as violating its massive software IP portfolio. Firms such as HTC Corp., Acer, LG Electronics and Samsung Electronics Co. Ltd. have already agreed to pay Microsoft royalties on Android-based phones. Motorola Mobility, now a subsidiary of Google, remains a holdout and is fighting Microsoft in court over patents.

Jim McGregor, founder and principal analyst at Tirias Research, said Microsoft is beginning to have success forcing firms that build smartphones and other products on behalf of others to sign licensing agreements for fear of being sued.

"Unfortunately, the contract manufacturers and ODMs are getting caught in the crossfire," McGregor said. "They almost have to have that legal indemnity to avoid getting sued."

Foxconn, the world's largest contract electronics manufacturer, is well known for building products for Apple Inc.—including iPhones and iPads—and firms. The firm is estimated to manufacture more than 40 percent of the world's consumer electronics.

Intellectual property battles have long been a part of the high-tech landscape, but seem to have ramped up in recent years. Companies like Microsoft, Apple and Google—which owns tens of thousands of patents—have been engaging in legal action and bidding to acquire other patent portfolios to strengthen their competitive positions.

Will the patent agreement with Foxcomm allow them to build systems for anyone if they pay the requisite royalties to Microsoft? If so, it could be a competitive edge for Foxcomm because their customers would have reduced patent infringement liability.

I don't know. I think that is really unclear. But it seems the idea is that Microsoft has such a broad patent portfolio that people are afraid that they may unknowingly violate it. Jim McGreggor thinks that we simply grant way too many patents these days and that that is part of the problem.